SPX S&P 500 Weekly Chart; Overbot; Rising Wedge; Gap-Fill; Negative Divergence Developing

As shown previously, the uber complacency shown by the CPC and CPCE put/calls, along with the negative divergence on the SPX hourly and daily charts, signal trouble beginning for the near-term (hours and days ahead). The stock market is overdue a pullback considering the bullish euphoric party, fearlessness and ongoing complacency for a month (this is rare).

So, if the stock market is soggy for a few days, how does the weekly basis look for sustainable downside? Remember, in recent weeks, following the price highs higher, the indicators were negatively diverging except for the MACD line that still had upside fuel. The top on the weekly basis cannot occur until the indicators are universally neggie d (or if bad negative news occurs out of the blue). As the bulls keep pumping stocks higher through the ECB meeting, through the Fed meeting and now into the jobs report tomorrow morning, the RSI is sneaking out some more upside juice.

The chart is very interesting since price came up to fill the gap from February and close-up loose ends for the bears. If stocks begin falling in earnest, the bears no longer have to worry about coming all the way back up to fill that gap; prices can now begin to linger lower for longer. The thin red lines show the indicators sloping negatively since the February top (they are weaker) but this is not negative divergence as yet since price has not matched or created a higher high since February. Nonetheless, you can see the weakness in the indicators now as compared to back then.

The ADX is down at 19 so the rally higher in price is not a strong trend higher. The last strong trend was the selling in February and March but that petered out as May ended and the Fed kept pumping.

What does all this mumbo-jumbo mean? You can not derive meaning as yet from the lower chart indicators as compared to the February top since current price is not higher than back then, thus, official neggie d does not exist over that 6-month time frame as yet.

You want to continue focusing on the rally move off the bottom. Price is in that red rising wedge formation which is a bearish pattern. Prices can fall drastically lower quickly from a rising wedge. For the higher highs in price this week compared to last week and the previous few weeks, the stochastics are overbot and neggie d agreeable to start sending price lower on the weekly basis. The money flow is also neggie d over the last 3 weeks and agreeable to softness ahead on the weekly basis. Ditto the histo. However, the RSI and MACD lines are still sloping higher over recent weeks providing more upside fuel for price on the weekly basis. Another high would be expected a couple weeks out after a pullback occurs.

Let's pull this 3-dimensional chess game together into something more simple to understand. A pullback should begin now for stocks. The stochastics on the weekly chart above will conspire with the universal neggie d on the hourly and daily charts and send the SPX south. Again, the only thing that can change this outcome is happy news talk such as a stimulus bill and on the other side, negative news would act as a bad catalyst and probably push stocks strongly lower quickly.

Stocks will retreat on the hourly and daily basis but after a few days, due to the possie d remaining on the RSI and MACD on the weekly chart above, want to come back up again.

Thus, you will get a scare in the stock market now with a dip, perhaps something sharp and quick, but after a few days, stocks will recover up to the same current highs again, say, in the 8/12/20 to 8/18/20 time frame. At that time, say the week of 8/17/20 and/or the week of 8/24/20, watch to see if the RSI and MACD on the weekly chart above goes neggie d when the SPX comes back up for the matching or higher price high. This likely marks a significant longer-term top in the stock market.

On a side note, the SPX monthly chart is cooked with universal negative divergence across all indicators. It is ready to receive the neggie smackdown on the monthly basis. Thus, the SPX hourly, daily, weekly and monthly charts are all negative wanting to see a selloff to begin now except for a couple indicators on the weekly chart that hint that price will drop for a week or so, but then recover again for a week or so, and that will be the top and swan song. The SPX monthly chart says it is all over now and it is time to flush the turd down the toilet bowl.

So there is lots of fun ahead. A selloff is set to begin at anytime and last a few days. Then back up to matching price highs after a few-day rally. Then, the SPX weekly chart should top out with neggie d, say in a couple weeks, and that will identify a significant top and beginning of a multi-week decline for the stock market, and likely weakness into year end. Take it day by day and let the charts guide you. The SPX monthly chart says once the stock market begins falling it is over on the long-term basis and this may wipe out any hope that stocks will recover a couple weeks out (the SPX will simply trail lower from present prices and not look back). This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.